Tesla says Musk ought to be paid $1tn – will shareholders agree?

Ahead of Tesla's annual common assembly (AGM) on Thursday, the electrical automotive maker has an essential message to shareholders: The boss is value $1 trillion.

It has taken out digital advertisements to make the case for Elon Musk's proposed bumper pay bundle, whereas Votetesla.com has run a video praising board chair Robin Denholm and director Kathleen Wilson-Thompson, with victory music blaring within the background.

It's not clear everyone seems to be singing the identical hymn, which suggests the AGM in Austin, Texas is about to change into a referendum on Musk himself after a rightward political flip that has made him one of the crucial polarizing CEOs in latest reminiscence.

Musk himself has moved to boost the stakes even additional on X – which he owns – by saying that Tesla's destiny “could affect the future of civilization.”

He has additionally used his social media megaphone to advertise among the deal's high-profile supporters, together with Dell Technologies' Michael Dell, Ark Invest CEO Cathie Wood and his brother, Kimbal, who sits on the Tesla board.

Kimble praised his brother's management qualities, saying, “There is no one who comes close to my brother.”

“Thanks bro ❤️,” Musk replied.

Not everybody agrees.

For some, the cleaning soap opera consideration surrounding Musk and his pay is symptomatic of how the automotive agency – Due to which there was a decline in gross sales – have misplaced their means underneath his management.

“What's surprising to me is that a company that's struggling to sell cars spends money on advertising to sell pay packages,” stated Ross Gerber, CEO of Gerber Kawasaki Wealth & Investment Management.

Mr. Gerber has decreased his Tesla holdings in recent times – and has begun to criticize the path it’s going.

,[Tesla] The firm wants to alter its core focus again to promoting EVs,” he said.

The deal Tesla wants shareholders to support is not one salary followed by twelve zeros.

Instead, it has given Musk the goal of increasing Tesla's market value from $1.4tn to $8.5tn at the time of writing.

He'll also have to oversee a massive boom in the company's self-driving “robotaxis” cars, bringing one million of them into commercial operation — that's no small deal. awesome launch,

Do that, among meeting other benchmarks, and Musk will be given 423.7 million new shares, worth about $1 trillion if the target valuation is reached.

Tesla did not respond to BBC requests for comment about its strategy to garner support from shareholders.

Of course, this isn't the first pay dispute that Musk and Tesla have been embroiled in.

Previously, Tesla had shareholders approve a twice-paid pay package for Mr Musk, worth tens of billions of dollars, if he achieved a tenfold increase in Tesla's market value.

He's met that milestone, but in 2024, a Delaware judge deal rejected On the basis that Tesla's board members were deeply involved personally and financially with the company's boss.

The Delaware Supreme Court is reviewing that decision — while deliberations over an even bigger pay package continue.

“The technique is similar to Tesla's, which doesn't imply it's regular. There's nothing regular about Tesla,” Columbia Law School professor Dorothy Lund told BBC News.

“They are not the poster children of good corporate governance.”

Professor Lund said such get-out-the-vote campaigns sometimes occur when a company is concerned, for example. About an activist shareholder who is forcing significant changes in the way it operates, such as who is on its board of directors.

,[But] I have never seen anything like this happen in my lifetime in terms of compensation decisions,” Professor Lund said.

And unlike the vote on that first compensation package, both Elon and Kimbal Musk will get a chance to vote as they try to reach the majority threshold needed to seal the deal.

Mr Musk is already the world's richest man, becoming the first known half-trillionaire earlier this year.

Tesla's argument in support of the pay package is based on the idea that Musk could leave the company if shareholders do not follow the board's recommendation and approve the pay package.

It said it could not afford to lose him, and that he had “the management qualities crucial to appreciate its long-term mission”.

In a video posted on VoteTesla.com, Ms. Wilson-Thompson said the board followed a seven-month process using legal and compensation experts to craft the compensation deal.

On last month's earnings call, Musk played down the focus on payments, saying the real issue was making sure he had enough control to run Tesla properly.

But — aside from the question of whether Musk, with his preoccupation with autonomous cars and humanoid robots, is heading the right way — there's also the matter of whether it's the board's job to champion the boss.

“The board's position is to train fiduciary accountability to shareholders, to not advocate for the CEO,” said Matthew Kotchen, an economics professor at the Yale School of the Environment. Co-author of a recent study Efforts are being made to assess the damage Mr Musk has recently caused to Tesla.

It is clear that many key decision makers do not agree that the deal represents value for money.

Proxy advisers Glass Lewis and Institutional Shareholder Services (ISS), which advise asset managers on how to vote on major corporate proposals, have recommended investors reject the pay package, saying it is excessive and will dilute shareholder value.

Norway's sovereign wealth fund, the world's largest sovereign wealth fund, has also followed suit, as has CalPERS, the largest public pension fund in the US.

New York State Comptroller Thomas DiNapoli urged buyers Directors have been additionally rejected for re-election to the board, saying that they had “failed to supply impartial oversight and accountability.”

As some establishments agree, this might lead Mr Musk to change into extra reliant on Tesla's unusually massive variety of retail buyers – who assist him – to realize his want.

It all means, in Words from a Morgan Stanley analyst Adam Jonas, that Thursday's vote goes to be one of many “most vital occasions” in Tesla's history – with a “distinct chance” the pay package will not pass.

It doesn't help Musk's cause that protesters have continued to hold anti-Tesla rallies, months after his controversial turn on US President Donald Trump in May after the government efficiency czar crashed and burned.

“It's laborious for me to think about that Elon Musk, within the close to future, will get well from the harm accomplished to this model,” Mr. Kotchen said.

Others, however, would say it would be unwise to bet against Musk given his extraordinary track record of entrepreneurship, even if the amount at stake was as high as $1tn.

“It's laborious to disclaim that Elon Musk's larger-than-life persona has helped drive extra curiosity and consciousness for his group than virtually another company chief within the fashionable period,” said Jessica Caldwell, head of insights at Edmunds.

He added, “He has change into a extra polarizing determine over time, however there’s nonetheless confidence in his capability to current daring, unconventional concepts.”

The trillion dollar question now is – do Tesla shareholders agree?